Hotter than normal weather this summer may pressure U.S. grid performance, as total load climbs year/year and natural gas consumption increases 1.7% from summer 2023 levels, according to federal officials.
There is a “higher likelihood” of reliability issues across a broad swath of the nation under “extreme” conditions, FERC staff reported in the Summer Energy Market and Electric Reliability Assessment.
For consumers, natural gas prices should remain lower through the summer months because of a storage surplus and near-record production. Using Energy Information Administration (EIA) data, Federal Energy Regulatory Commission staff detailed the difference in projected gas prices this summer from a year ago.
Futures prices at Henry Hub and many “major hubs” as of May 1 “were lower than average final (settled) futures prices for summer 2023. However, futures prices at Transco-Z6 in New York City and Mid-Atlantic Eastern Gas-South near Pittsburgh were higher than the average prices for each location last summer as regional natural gas demand growth in these regions is expected to outpace stable natural gas production in the Northeast.”
Henry Hub futures for summer 2024 as of May 1 “averaged $2.25, down 9% from last summer’s settled prices,” staff noted. In the West, meanwhile, gas prices “are expected to decline by more than 30% from last summer’s prices, although they are projected to remain the highest of any region in the country during summer 2024.”
Prices at SoCal Citygate, the main Southern California hub, are projected to average $3.62, with prices at the PG&E Citygate averaging $3.12. Futures prices at Waha in West Texas were averaging $1.08 as of May 1, down by 47% from last summer’s settled futures price of $2.04, staff noted.
Exports Higher
The United States is entering the summer season “with relatively high levels of natural gas in inventory, 23% more than last year,” FERC staff noted. “Summer natural gas production is forecast to average 102.3 Bcf/d, a slight decline of 1.6% relative to last summer and 5.8% above summer 2024 natural gas demand.”
Meanwhile, gas consumption for electricity generation, aka power burn, should “remain steady, making up around 45% of total natural gas demand this summer,” FERC researchers noted. “The share of U.S. electricity generated from natural gas power plants is also forecast to average close to 45%, down about 1% from last summer.”
Natural gas exports, including LNG and pipeline net exports, should increase 11% from the summer of 2023. Exports of liquefied natural gas and via pipe to Mexico are set to “contribute the most to year/year summer demand growth.” In total, they should account for 14% of total demand this summer, according to FERC staff.
In the residential/commercial sector, consumption is forecast to increase by 7.8% from last summer, and be about 9.5% of total demand. Industrial/other sector demand, though, is forecast to dip by 1.6% year/year, “notwithstanding expected low natural gas prices, to make up about 30% of total demand this summer.”
Data Center Bump?
FERC staff noted that total net summer generating capacity is projected to grow year/year by 3.4%, to 1,207 GW. Most of the additions would be solar and wind resources, and most of the retirements would be coal resources.
Still, on the demand side, the electric industry “faces supply chain concerns and significant load growth.” Of note is an EIA projection that “total load will increase by 4.4% (39.75 TWh) relative to summer 2023 for the continental United States, with new data centers being a significant contributor to this growth.”
FERC staff reported that nearly 2,000 miles of Bulk Power System transmission lines “are either expected to be completed by the end of summer 2024 or already entered service this year, with the largest number of projects in the Electric Reliability Council of Texas (ERCOT), Midcontinent Independent System Operator (MISO) and PJM Interconnection LLC.”
The North American Electric Reliability Corporation “anticipates all regions will have adequate resources available to meet the expected operating reserve requirement under a normal demand scenario…”
However, ERCOT and MISO face resource shortfalls under an “extreme demand scenario and may need to rely on operating mitigations. Also facing issues under extreme demand situations are ISO-New England (ISO-NE), and the Western Electricity Coordinating Council (WECC) and its subregions that serve the Southwest, including California.
